In today’s world, it’s easy to buy things that we can’t afford as long as it stays within our credit card limit. Just swipe your card and tada! That thing you’ve been wanting to have is all yours. Buy now, pay later. You came home super happy, but a few weeks later, you’re stressed. You have your monthly bills, and on top of that, you have debt. Can you pay your balance off?
If I had a choice, I will not get a credit card no matter what because I don’t like having debt. I’ve heard a lot of horror stories, and that scares me. However, it is necessary to build your credit because it will be helpful when the time comes that you will need it for large purchases, such as buying a house and a car.
Over the last three years since I applied for a credit card, I have gotten comfortable using it. Thanks to the advice I got from my family, friends, colleagues, and the internet! So for today’s post, I will share some ways I avoid debt. Note that I am no expert, and these are based on what I learned from them and my experiences.
Save money in advance.
If you want to buy something but you can’t afford it, save money for it. Yes, it will take some time, but this will make that purchase more meaningful because you are working hard knowing that you will save some of your hard-earned money to buy that thing you’ve been wanting to have. You will even learn to value it and take good care of it more. It will not only make you feel fulfilled, but it will also save you from getting stressed from debt. It will also give you time to think about it clearly, and you will find out if you are just getting swayed.
This is probably one of my favorite methods for buying large purchases. I grew up learning about the importance of saving money. If you want something, save for it. Don’t rely on credit cards. I believe that anything you want but don’t need can wait.
Avoid impulse buying.
When you saw something you want, don’t purchase it immediately. Go home and think about it first. Allow a day or more to assess yourself. Do you really want/need it? Think long term. Do you still see yourself using it after 3 months? 6 months? 1 year? If you still want it, then buy it. If it’s too expensive or over your spending limit, think about the previous tip.
Avoid going beyond your spending limit.
Spending beyond your limit will not only hurt your credit score, but it will also charge you fees. Also, don’t assume that you can spend your entire limit or close to it. If you do, you will also hurt your credit score. So get in the habit of spending less. Cutback on purchasing nonessential items and prioritize your needs. They say that if you can’t pay for something in cash, that means that you cannot pay for it when you use your credit card. Again, think long term. I’m sure you don’t want to owe money that will be hard to pay off later.
Pay off your balance on time every month.
Who wants to pay for interest? Let me guess, no one, right? The amount of money you pay for interest can be used to buy on other crucial things, or if that turned out to be extra money, then you can save it or use it to buy the things you want. It is also one reason I don’t want to use credit cards. I treat each penny I earn as big as the other coins and bills. Surprisingly, I learned that it can be avoided by paying off your balance on time. It is a challenge, but it would be easier to pay for it if you don’t spend more than you earn.
Now, I want to emphasize the importance of paying on time. If you miss your due date, even if you pay off your balance, you will still lose money. Why? They will charge you more or less than $30 depending on your bank, and you will also pay for interest. Can you imagine how much money you’ll lose? You will not only throw away your hard-earned money, but it will also hurt your credit score. So make it a habit to pay on time and pay it in full as much as possible. Set reminders and remember to always spend what you can pay when you use cash.
Limit the number of credit cards you have.
It is tempting to avail that credit card from your favorite shop, right? Most especially if it comes with a promo where you get 20% off your first purchase. Aside from that, there are a lot of perks, but the thing is, can you manage all of them? If you do, then that’s good. But if you’re not careful, you might spend more because every debt you have is distributed across your cards, and they all have different due dates. You might lose track of how much you have already spent, and the next thing you know, you have spent more than you can pay. That will make it hard for you to pay off your balance on each card, which means that you will have to pay more because there will be interest.
Moreover, choosing the right credit card for you is essential. Educate yourself about the different types of credit cards that are offered before applying and choose the one that will give you more benefits. As for me, I have chosen two credit cards from my bank: cash rewards and travel rewards. I earn cash backs on both, and it doesn’t have an annual fee, so I love it! All I need to do is to handle it properly and pay on time to avoid getting charged for interest and late fees.
Bonus Tip: Build emergency fund.
In case of emergency, it is important to have an emergency fund. What is this fund? It is a fund that can cover your expenses during situations when you badly need it, and you don’t have enough money to cover for it, such as losing your job or getting sick. I will discuss more on this matter in my upcoming post about saving money.
Having a credit card has many advantages, and we can get the most out of it when we know how to manage it. I want to emphasize the importance of this because there will come a time that we will have more responsibilities, so it is better to start the practice now. We cannot avoid having debt, but remember that it is possible to minimize it. It will not only save us from stress, but it will also be helpful when we are handling a large amount of debt from emergency or important situations. If that time comes, we will not worry about having too much debt, and we will only focus on our bills and that specific debt.
How do you avoid or minimize debt? Do you also do these tips? Do you have a different approach? Share it with me. I would love to learn more strategies.